Regulation in Saudi Arabia Weighs on Telecom Egypt Results

Telecom Egypt’s first quarter results were hurt by government actions totally out of its control. And for once, those actions weren’t in turbulent Egypt, but instead in Saudi Arabia.

Revenues from its international carriers affairs division fell by 18% to 731 million Egyptian pounds ($104 million)in the first three months of the year, compared to the same period last year. The division manages Telecom Egypt’s license to operate international calls between carriers in Egypt and other global operator’s networks, whether fixed or mobile.

TE chief executive Mohamed Elnawawy says the decline is due to a sharp fall in calls coming from Saudi Arabia as the government there has made it more difficult to register a SIM card.

The international carriers affairs unit makes up about 29% of total income, so the decline weighed on total revenue in the first quarter. That contributed to a 36% drop in net profit to EGP549 million. “A more strict policy resulted in less international minutes calling out of Saudi Arabia,” said Mr. Elnawawy in an interview with The Wall Street Journal.

In late 2012, Saudi Arabia’s Communications and Information Technology Commission, or CITC, began ensuring that all SIM cards bought in the kingdom were registered with a particular ID. Then in April last year CITC told telcos – STC, Mobily and Zain KSA – to end free mobile roaming as millions of SIM cards had been shipped out of the country so that expats could phone families at home at domestic rates and businesses with operations overseas avoided international calls.

TE will be aiming to offset any further decline in its revenues from connecting international calls by providing its much-anticipated mobile services domestically in Egypt. It has been granted a license at a cost of EGP2.5 billion by the Egyptian government to offer mobile services, which could begin in the third quarter, Mr. Elnawawy said. The government-owned telco will join existing mobile operators – Vodafone Egypt (45%-owned by TE), France Telecom-controlled Mobinil and a unit of U.A.E.’s Etisalat.